As the value of Bitcoin plummeted from its record peak, dipping below critical support levels at $68,300 and $63,400, experts began anticipating a further drop to under $60,000, expecting a rebound following the Bitcoin halving. Presently, the price of BTC declined to a low of $59,768, raising the question: could the Bitcoin halving trigger a sentiment shift leading to a substantial rally within the cryptocurrency markets?

1. Impact of Bitcoin Options Expiry
Before the upcoming Bitcoin halving, a substantial amount of over $2 billion in both Bitcoin and Ethereum options are poised to expire. Approximately 21,000 BTC options with a notional value of $1.35 billion are set to expire, featuring a put-call ratio of 0.64. Concurrently, nearly 27,785 ETH options valued at about $0.81 billion face expiration, with a put-call ratio of 0.49. With both BTC and ETH trading under their maximum pain points, elevated volatility within the crypto market persists.

Moreover, a significant test awaits the market during the monthly expiry on April 26, where over 88,000 BTC options with a notional value of $5.5 billion will expire. The put-call ratio stands at 0.66, indicating a notable preference towards calls over put open interest. This occurrence suggests a high likelihood of Bitcoin trading below $60,000 subsequent to the halving event. Additionally, 860,000 ETH options valued at $2.6 billion are set to expire, featuring a put-call ratio of 0.51, with a maximum pain point set at $3,100. Consequently, the market braces for the impact of over $8 billion in Bitcoin and Ethereum options expiration.

Bitcoin and Ethereum open interests have been declining due to the waning interest leading up to the halving event, accompanied by decreasing derivative volumes. Notably, traders are expressing expectations for a rise to $100,000 by September.

2. Historical Trends of Bitcoin
Heading towards the Bitcoin halving, the cryptocurrency market, including Bitcoin, mirrors a pattern of pre-halving selloffs seen in prior halving events. While a sudden surge to an all-time high for BTC remains infeasible, history indicates that such peaks usually take several months to stabilize. Notably, Elja Boom, a notable figure featured in Forbes 40 Under 40, forecasted a bearish trend for Bitcoin in Q2 and Q3, projecting a continuation of this trajectory this year.

Furthermore, the increase in Bitcoin mining costs may prompt miners to sell their holdings due to the halving of mining rewards to 3.125 BTC. Elja Boom expressed optimism towards Bitcoin and cryptocurrencies, emphasizing the likelihood of months of sideways movement following seven consecutive months of advancements. Despite this, he maintained expectations for a price target exceeding $150,000 for Bitcoin and over $12,000 for Ethereum, speculating on an uptick for altcoins amidst growing adoption.

3. Federal Reserve Rate Cuts Delay and Macroeconomic Uncertainty
Recent figures reflecting elevated CPI, PPI, and PCE inflation rates, along with the robust labor market and resilience of the US economy, have provided the Federal Reserve with options to contemplate postponing rate reductions. Statements issued by Fed Chair Jerome Powell and Vice Chair Philip Jefferson indicated a probable delay in rate cuts, with reports suggesting the possibility of only two cuts throughout the year.

The upheaval in stock and crypto markets stemmed from speculations about Fed rate cuts initially anticipated for March, later postponed to May, before the latest inflation updates deferred the cuts to September. This shift significantly impacted stock and crypto markets, leading to diverging trends. Markus Thielen, CEO of 10x Research, emphasized the pivotal role of CPI data over Bitcoin halving. A recent CPI reading of 3.5% catalyzed a decline in BTC prices, prompting forecasts of Bitcoin descending below $60,000, with potential downward trends towards $52,000.

4. Geopolitical Tensions Between Iran and Israel
Escalating tensions between Iran and Israel resulted in almost half a trillion dollars in crypto liquidations over recent days, contributing to a decline in the global crypto market from $2.64 trillion to as low as $2.21 trillion. The ongoing situation, accompanied by other macroeconomic occurrences, propelled the US dollar index (DXY) above 106, marking its peak since early November.

Additionally, the US 10-year Treasury yield (US10Y) soared to a six-month high of 4.622%, failing to decrease. Given the inverse relationship between Bitcoin and DXY alongside Treasury yields, the increments in both indices led to Bitcoin’s price plummeting to $60,000. Kaiko data indicated that BTC’s 90-day correlation with the US Dollar index reached a negative 0.24, the lowest point in over a year, attributed to elevated US inflation figures and escalating geopolitical tensions.

5. Bitcoin Exchange-Traded Fund (ETF) Outflows
Bitcoin spot ETFs observed their fourth consecutive outflow this week, witnessing a net outflow of $165 million on Wednesday. The reduced buying activity within Bitcoin ETFs over the past days signals a decline in institutional interest and aligns with the ongoing tax-filing season in the United States.

Although the outflows from Grayscale GBTC exhibited signs of deceleration, a surge in outflows occurred on April 17, with GBTC witnessing a rise from $79.4 million to $133.1 million. Ark 21 Shares Bitcoin ETF (ARKB) experienced another day of negative outflows, while Bitwise Bitcoin ETF (BITB) recorded its inaugural outflow of $7.3 million on Wednesday.

6. Implications of Bank Runs following the End of Bank Term Funding Program (BTFP)
The rapid reduction in Treasury Reserve balances, correspondingly with the escalation of the TGA, as the BTFP diminishes, poses risks of bank failures amidst the Federal Reserve delaying rate cuts and amid adverse economic conditions. Originating as an emergency lending initiative by the Federal Reserve, the Bank Term Funding Program (BTFB) was formulated to offer supplementary funding to banks.

The unexpected bank failures witnessed in March 2023 involving entities like Silvergate Bank, Signature Bank, and Silicon Valley Bank prompted interventions by the Fed and the Treasury Department to support banks through the BFTP. Experts have noted that with the cessation of new loans under the BFTP, a sizable portion of essential liquidity has been withdrawn, signaling short-term bearish conditions for the markets.